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Will the butter win $ 80 this summer?



India, the world’s third-largest oil importer, is the latest point for coronavirus. He recently achieved a record number of new daily cases of coronavirus, a statistic that has reduced oil demand and put pressure on oil prices.

OPEC +, out of its own necessity, intervened in the oil market on the supply side of the equation to offset the depressed pandemic oil demand. And despite the group’s relative success in curbing oil production to prevent excess oil stocks before the market fully recovered, India’s booming number of cases prevented a faster recovery in oil prices.

This has put even more pressure on OPEC + to meet market expectations. But there is no doubt a change in the momentum of the oil markets. In fact, oil prices have recovered somewhat in recent months, and the vast majority of oil experts and analysts believe that this trend will continue.

The question is not whether the market will improve. The question is how quickly it will improve and where it will reach the peak of this recovery.

Locks in Europe add another unknown element to the combination of oil prices. A month ago, Europe renewed many of its restrictions on blocking, slowing the recovery in oil prices. But now that India is in the midst of its biggest jump on COVID-1

9 since the start of the pandemic, Europe is preparing to lift those blockages. EU officials presented a proposal this week to ease summer travel restrictions for their 27 countries. This will increase the demand for jet fuel – a critical component of the demand for crude oil.

In the United States, Covid-19 cases are also shrinking as the number of vaccinated grows. As a result, several states in the United States, including New York, have eased the restrictions. All this will have a strong effect on the price of crude oil. Related: Asian buyers of liquefied natural gas are preparing for a harsh winter

But that doesn’t mean all analysts agree on what this will do for oil demand, let alone what effect it will have on oil prices.

The IEA, for a start, reviewed its prospects for oil demand for this year on April 14. He estimates that oil demand will now increase by 5.7 million barrels per day this year, reaching 96.7 million barrels per day. The reason for this upward revision is due to an increase in the IEA’s forecast for oil demand for the United States and China – the two largest oil importers in the world.

As of April 6, the EIA reports global oil demand of 97.7 million barrels per day this year. Compared to Brent prices, which were close to $ 65 a barrel in March, the EIA sees no significant movement in Brent prices, valuing at $ 65 a barrel in the second quarter of 2021, $ 61 a barrel in the second half of 2021 and even worse, $ 60 a barrel in 2022.

Even a week ago, Rystad Energy adjusted its April oil demand by almost 600,000 barrels a day. For May, it revised it to 914,000 barrels a day, citing India’s demand problems as a result of the pandemic – a situation that would undoubtedly lead to new inventory.

But not everyone is so pessimistic. Goldman Sachs sees things all the more rosy, with oil reaching $ 80 this summer. The rationale for this positive outlook for oil prices is simple. “The scale of the forthcoming change in the volume of demand – a change to which supply cannot coincide – must not be underestimated.”

Rystad analyst Louise Dixon said oil demand should still increase by 3 million barrels a day from now until the end of June, problems with India or not. According to her, oil prices should return to $ 70 a barrel in the coming months.

UBS sees the introduction of vaccines as a major positive moment for the oil industry. As people return to normal and businesses open up completely, oil demand will increase Brent to $ 75 a barrel in the second half of the year, according to analyst Giovanni Staunovo. Related: Oil prices reached 7-week optimism in demand

Moody’s also has a very positive view of the moment of the recovery in the price of oil, referring to the restraint of consumer demand, which will stimulate the global economic recovery. But their medium-term price range is still limited to $ 65 a barrel. Moody’s sees this economic recovery as accelerating the recovery in oil demand by the end of this year and the beginning of next.

The outlook may be uncertain, but the current trend is definitely declining oil stocks – a sign of increased oil demand, while OPEC + continues to limit production. For example, in the highly visible US oil market, crude oil inventories finally returned to the five-year average for this time of year of 493 million barrels.

The Indian virus explosion will not prevent the recovery of oil prices. But it is likely to slow recovery in the second half of this year or even early to mid-next year.

If this is the case, it is a long time for OPEC + members to continue to limit their production while demand takes its sweet time to recover.

By Julian Geiger for Oilprice.com

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